Saving For College

Today’s job market is more competitive than ever, and a college degree is something your child should not be without. A person holding a bachelor’s degree earns almost twice as much as one with only a high school diploma, according to the Census Bureau. Financing the costs of that college degree, however, is becoming increasingly difficult.

There’s an array of products and services out there that promise to help students look their best before they send in that first college application. The help doesn’t come cheap, however. From private counselors to private tutors and financial counselors, the preparation can easily cost families thousands of dollars.

The cost of college itself, including tuition, fees, and living expenses, can top $45,000 a year at some private institutions, according to the National Association of Independent Colleges and Universities. In-state school costs are lower, averaging $13,000, if room and board is included, according to the College Board.

Save from day one
Start saving for college the day your child is born. Beginning early is important because procrastination can cost money. The longer you wait to start saving, the more you’ll have to set aside each month to reach a specific goal.

For example, you can build a $100,000 nest egg in 15 years by putting about $300 a month in an account earning 8 percent interest. But if you reduce your saving period to 10 years, you will have to invest more than $500 a month to yield the same amount.

You can take the highest risk possible, such as investing in the stock market, for a 1-year-old; but if you don’t start saving until the child is 15, you can’t afford to make risky, high-return investments because of the possible loss of principal.

Other finance options
If your child will enter college in the next year or so, your options are limited. Should you take out a home-equity loan or go for a government-sponsored student loan? See the sidebar box for financial aid suggestions. Or your child may consider working his or her way through college.

There’s other help on the horizon. Increased in part by the competition for the best students, a number of colleges have launched new programs that include a freeze on tuition increases, offering more grants instead of loans, and tinkering with financial-aid formulas to reduce the amounts that families are expected to contribute.

Experts agree that planning for college should begin before a high school student’s senior year, with some students and parents looking into colleges during sophomore year.

College visits
Adam Robinson, an education expert and author in New York, recommends that visits wait until the student’s junior year. Visiting campuses earlier than this is “a huge drain,” because of airline costs, hotel, and gasoline expenses.

Robinson says many high school students often don’t know what to look for, and families might be wasting time visiting schools that students would never get admitted to or even end up applying to. “It makes more sense to find out where you’re accepted and then do the visits,” he says.

But there are exceptions, says Anne Marie Chaker, an education writer for The Wall Street Journal. For instance, if a nearby college recommends an interview, a student should show up for it, she says. Students placed on a waiting list for admission should especially make a point of visiting the school if they want to be accepted, she adds.

HELP WITH COLLEGE FINANCES

There’s plenty of help available in getting financial aid. Consider filling out the Free Application for Federal Student Aid (FAFSA), which can be obtained from your high school guidance counselor or by calling 800-4-FIN-AID, or go on the Web to www.finaid.org.

Other good sources are Sallie Mae at (800)891-4599 or on the Web at www.salliemae.com; www.fastweb.com; the U.S. Department of Education at (800) 433-3243 (ask for Student Guide to Financial Aid) or online at www.studentaid.ed.gov; or the Kentucky Higher Education Assistance Authority at (800) 928-8926 or online at www.kheaa.com.

One of the better how-to books is Paying for College Without Going Broke, by financial consultant Kalman Chany.

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